At 2.42 p.m., the bencmark Sensex was trading with a loss of 587.76 point or 1.5 8 per cent at 36,535.55, while the broader index, the Nifty50 fell over 167 points to 10,836.20.
The global oil benchmark, Brent, was trading at $68 a barrel from its Friday's close of $60 prior to the attack on Saudi oil facilities during the weekend.
Automobile companies on the NSE lost the most, being the sectors to be most affected by the rising cost.
The Nifty auto index slipped over 3 per cent in the afternoon.
Brent, on Monday surged as much as 20 per cent to above $71 a barrel as markets reopened after a major attack on Saudi Arabia's oil infrastructure.
"These attacks resulted in production suspension of 5.7 million barrels of crude oil per day," Saudi Aramco said in a statement.
Oil prices, experts said, could spike in the next several days as a result of the attack on Saudi's state-run oil company, Saudi Aramco the second-largest oil producer in the world.
The Drone attacks claimed by Yemen's Houthi rebels set alight two major oil facilities run by the state-owned company Aramco in Saudi Arabia on Saturday, the Kingdom's Interior Ministry said.
The Saudi Press Agency, citing a statement by the Ministry, said that the drones caused the fire at the refinery in the city of Abqaiq, as well as the blaze at the Khurais oil field, around 150 km from Riyadh.
( With inputs from IANS )